3.8 Provisions and Contingencies:
A provision is recognized if, as a result of a past event, the company has a present legal or constructive obligation that can be reasonably estimated, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources embodying economic benefits or the amount of such obligation cannot be measured reliably.
When there is a possible obligation or a present obligation in respect of which, in the likelihood of outflow of resources embodying economic benefits is remote, no provision or disclosure is made.
3.9 Cash flow statement:
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
3.10 Impairment of assets:
The company assesses, at each reporting date, whether there is an indication that an asset may have to be impaired. If any indication exists, or when annual impairment testing for an asset is required, the company estimates the asset’s recoverable amount. An asset’s recoverable
amount is the higher of its fair value less costs of disposal and value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
3.11 Taxes on Income:
Income tax expense comprises current and deferred income tax. Income-tax expense is recognized in net profit in the statement of profit and loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. The company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
3.12Borrowing Costs:
Borrowing cost comprises of interest and other costs incurred in connection with the borrowing of the funds. All borrowing costs are recognised in the Statement of Profit and Loss using the effective interest method except to the extent attributable to qualifying Property Plant and Equipment (PPE) which are capitalized to the cost of the related assets. A qualifying PPE is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. Borrowing cost also includes exchange differences to the extent considered as an adjustment to the borrowing costs.
4. Critical accounting judgments, assumptions and key sources of estimation and uncertainty
The preparation of the Standalone financial statements in conformity with the measurement principle of Ind AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Differences between the actual results and estimates are recognized in the year in which the results are known / materialized and, if material, their effects are disclosed in the notes to the Standalone financial statements.
Following are the key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year:
4.1 Depreciation and impairment on property, plant and equipment:
Property, plant and equipment are depreciated on straight-line basis over the estimated useful lives in accordance with Schedule II of the Companies Act, 2013, taking into account the estimated residual value, wherever applicable. The company reviews its carrying value of its Tangible Assets whenever there is objective evidence that the assets are impaired. In such situation asset’s recoverable amount is estimated which is higher of asset’s or cash generating units (CGU) fair value less cost of disposal and its value in use. In assessing value in use the estimated future cash flows are discounted using pre-tax discount rates which reflect the current assessment of time value of money. In determining fair value less cost of disposal, recent market realizations are considered or otherwise in absence of such transactions appropriate valuations are adopted. The Company reviews the estimated
useful lives of the assets regularly in order to determine the amount of depreciation and amount of impairment expense to be recorded during any reporting period. This reassessment may result in change estimated in future periods.
4.2 Leases:
The Company has taken the commercial properties under contractual agreements for its business operations. Its accounting involves significant management judgment for identification, classification and measurement of lease transactions at the time of lease commencement. The assessment of the lease liability and Right of Use asset under lease arrangements are based on the assumptions and estimates of the discount rate, lease term including judgment for exercise of options to extend or terminate the contract, dismantling and restoration costs, escalation in rentals etc. Further, these will be continuously monitored at each reporting period to reflect the changes in the agreements and management estimates.
4.3 Impairment allowances on trade receivables:
The Company evaluates whether there is any objective evidence that trade receivables are impaired and determines the amount of impairment allowance as a result of the inability of the customers to make required payments. The Company bases the estimates on the ageing of the trade receivables balance, credit-worthiness of the trade receivables and historical write-off experience. If the financial conditions of the trade receivable were to deteriorate, actual write-offs would be higher than estimated.
4.4 Income taxes:
The Company’s tax jurisdiction is India. Significant judgments are involved in determination of taxability of certain income and deductibility of certain expenses during the estimation of the provision for income taxes.
4.5 Defined benefit obligation (DBO):
Critical estimate of the DBO involves a number of critical underlying assumptions such as standard rates of inflation, mortality, discount rate, anticipation of future salary increases etc.
as estimated by Independent Actuary appointed for this purpose by the Management. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.
4.6 Provision for de-commissioning:
The company has recognised a provision for decommissioning obligations associated with the leased premises on which the plant is super structured. In determining the fair value of the provision, assumptions and estimates are made in relation to discount rates, the expected cost to dismantle and remove the plant from the site and the expected timing of those costs.
4.7 Provisions and Contingencies:
Provisions and liabilities are recognized in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events and the amount of cash outflow can be reliably estimated. The timing of recognition and quantification of the liability requires the application of judgment to existing facts and circumstances, which can be subject to change.
Management judgment is required for estimating the possible outflow of resources, if any, in respect of contingencies/claim/litigations/against the Company as it is not possible to predict the outcome of pending matters with accuracy.
The carrying amounts of provisions and liabilities and estimation for contingencies are reviewed regularly and revised to take account of changing facts and circumstances.
As Per our report of even date For and on behalf of the Board
For BRAHMAYYA & Co., YUGANDHAR MEKA VENKAT AKKINENI
Chartered Accountants Chairman Managing Director
FRN No: 000513S DIN:00012265 DIN: 00013996
E S H MOHAN VAISHALI KOHLI K. PURUSHOTHAM NAIDU
Partner Company Secretary Director & Chief Financial Officer
Membership No.028134 M. No. ACS63818 DIN: 01883663
Place: Hyderabad Date : 23 May, 2024
Note 5.14 (a) Refer Statement of changes in Equity for Movement in balances of reserves Note 5.14 (b) General Reserve
The General Reserve is created from time to time by appropriating profits from retained earnings. The general reserve is created by transfer from one component of equity to another and accordingly it is not reclassified to the Statement of profit and loss.
Note 5.14 (c) Retained Earnings
Retained earnings generally represents the undistributed profit/ amount of accumulated earnings of the company.
Note 5.14 (d) Foreign Currency Translation Reserve relates to exchange differences for investment in Wholly owned foreign subsidiaries as the same are classified as non-integral foreign operations.
Note 5.14 (e) Other Comprehensive Income
Other Comprehensive Income (OCI) represents the balance in equity for items to be accounted under OCI and comprises of:
items that will not be reclassified to profit and loss
a. The Company has made an irrevocable election to present the subsequent fair value changes of investments in OCI. This reserve represents the cumulative gains and losses arising on the revaluation of equity instruments measured at fair value including tax effects. The company transfers restated fair value amounts from this reserve to retained earnings when the relevant financial instruments are disposed.
b. The actuarial gains and losses along with tax effects arising on defined benefit obligations have been recognised in OCI.
Note 5.14 (f): In respect of the year ended 31st March, 2024, the Board of Directors has proposed a dividend of Rs.3/-per equity share, subject to approval by the shareholders at the ensuing Annual General Meeting after which dividend would be accounted and paid out of the retained earnings available for distribution in accordance with the provisions of the Act and for the year ended 31st March, 2023, the Company paid dividend of Rs.2/- per equity share as approved by the Shareholders in its respective Annual General Meeting.
b) Defined Benefit Plans: General Description of the Post Employment defined Benefit Plans;
i) Gratuity:
The company provides for gratuity to the employees as per Payment of Gratuity Act,1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity is payable on retirement/resignation The gratuity plan is a Unfunded plan and the company provides liability in the books of account based on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method.
ii) Compensated Absence:
The Company has a policy on compensated absences which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the balance sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur. Encashment of accumulated earned leave, subject to maximum permissible limits as per the terms of appointment, will be paid to the employee on separation.
Operating segments are identified and reported taking into account the different risk and return, organization structure and internal reporting system. Segmental reporting as per Ind AS-108 as notified by MCA is not applicable, as the Company is engaged in manufacture of a single line of product.
Note 5.36 Impairment of Assets
The company assesses, at each reporting date, whether there is an indication that an asset may have to be impaired. If any indication exists, or when annual impairment testing for an asset is required, the company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs of disposal and value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
a) Company has no transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.
b) No charges or satisfaction is yet to be registered with Registrar of Companies beyond the statutory period.
c) There is no Scheme of Arrangements that has been approved in terms of sections 230 to 237 of the Companies Act, 2013.
d) The company has not granted any Loans or advances in the nature of loans to promoters, directors, KMPs and the related parties (as defined under Companies Act, 2013,) either severally or jointly with any other person that are repayable on demand or without specifying any terms or period of repayment.
e) There are no transactions that are not recorded in the books of account and have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.
f) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
Note 5.43:
As at 31.03.2024, the company has invested US$ 5,25,000, INR equivalent Rs.432.45 Lakhs/- in Alufluoride International Pte Limited, Singapore. The company was allotted 5,25,000 ordinary shares of the face value of US$ 1 each fully paid up. Accordingly, Alufluoride International Pte Limited, Singapore has become the 100 per cent owned subsidiary of the company. An MOU was signed between Alufluoride Limited, Visakhapatnam and Jordan Phosphate Mines Company PLC, Jordan and Indo Jordan Chemical Company, Jordan (Joint Venture Partners) to set up a green field Aluminium Fluoride manufacturing facility at Jordan. In furtherance of the objectives of the MOU, Alufluoride International Pte Ltd., Singapore proposes to invest up to 67 percent of the capital of the new company and the balance 33% will be invested by the above Joint Venture Partners.
A) No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities (“Intermediaries”) with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries)
B) The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
Note 5.46 Previous year’s figures have been regrouped and rearranged wherever necessary to make them comparable with the current year figures.
As Per our report of even date For and on behalf of the Board
For BRAHMAYYA & Co., YUGANDHAR MEKA VENKAT AKKINENI
Chartered Accountants Chairman Managing Director
FRN No: 000513S DIN:00012265 DIN: 00013996
E S H MOHAN VAISHALI KOHLI K. PURUSHOTHAM NAIDU
Partner Company Secretary Director & Chief Financial Officer
Membership No.028134 M. No. ACS63818 DIN: 01883663
Place: Hyderabad Date : 23 May, 2024
Note No. 6.3 Fair Valuation Techniques
The fair values of the financial assets and liabilities are included at the amount that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
A) The following methods and assumptions were used to estimate the fair values
The fair value of cash and cash equivalents, trade receivables and payables, financial liabilities and assets approximate their carrying amount largely due to the short-term nature of these instruments. The management considers that the carrying amounts of financial assets and financial liabilities recognised at nominal cost/ amortised cost in the financial statements approximate their fair values. The investments are designated and recognised through Other Comprehensive Income and the fair value is measured at the quoted market value
B) Fair value hierarchy
Level 1: 1 hierarchy includes inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the "entity" can access at the measurement date.
Level 2: Inputs other than quoted prices included within level 1 that are observable either directly or indirectly for the asset or liability.
Level 3: Inputs for the asset or liability which are not based on observable market data (unobservable inputs).
Note No-6.4 Financial risk management framework
A) The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Board of Directors monitors the compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.
i) Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables), from cash and cash equivalents, deposits with banks. The management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis
ii) Financial assets that are neither past due nor impaired
"Cash and cash equivalents, deposits with banks, security deposits, investments in securities & mutual funds are neither past due nor impaired. “Cash and cash equivalents, deposits are held with banks which are reputed and credit worthy banking institutions. Hence the expected credit loss is negligible. “Investments in investments in securities & mutual funds are actively traded in the stock markets and and there is no collateral held against these because the counterparties are entities with high credit ratings assigned by the various credit rating agencies. Hence the expected credit loss is negligible"
iii) Financial assets that are past due but not impaired
Credit risk arising from trade receivables is managed in accordance with the Company’s established policy, procedures and control relating to customer credit risk management. The average credit period on sales of products is less than 30 days. All trade receivables are reviewed and assessed for default on a quarterly basis. For trade receivables, as a practical expedient, the Company computes credit loss allowance based on a provision matrix. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forward-looking estimates. The provision matrix at the end of the reporting period is as follows:
i) Liquidity risk is defined as the risk that the group will not be able to settle or meet its obligations on time or at a reasonable price. The groups' objective is to maintain optimum level of liquidity to meet its cash and collateral requirements at all times. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit line to meet obligations. Due to the dynamic nature of underlying business, company maintains flexibility in funding by maintaining availability under committed credit lines.
d) Market risk-Security investments prices
The price risk arises from the investments held by the company which has been classified in the financial statements as financial asstes through other comprehensive income and the same are held for receiving contractual cash flows and for sale. The company has adopted a policy of diversification of portfolio for mitigating the price risk.
ii) Equity Price Sensitivity Analysis:
The sensitivity analysis below have been determined based on the exposure to equity price risks for Investments in equity shares (including investments in equity oriented mutual funds) of companies.
If equity prices had been 5% higher/lower, profit for the year ended 31st March, 2024 would increase/ decrease by Rs.107.21 Lakhs (for the year ended 31st March, 2023: increase / decrease by Rs.50.79 Lakhs) as a result of the change in fair value of equity investments which are designated as FVTOCI.
As Per our report of even date For and on behalf of the Board
For BRAHMAYYA & Co., YUGANDHAR MEKA VENKAT AKKINENI
Chartered Accountants Chairman Managing Director
FRN No: 000513S DIN:00012265 DIN: 00013996
E S H MOHAN VAISHALI KOHLI K. PURUSHOTHAM NAIDU
Partner Company Secretary Director & Chief Financial Officer
Membership No.028134 M. No. ACS63818 DIN: 01883663
Place: Hyderabad Date : 23 May, 2024
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